Earlier this year the World Economic Forum called for a Universal Basic Income payable almost unconditionally to citizens. Is this a realistic aspiration?
The idea had been discussed at Davos and the WEF dutifully promoted the idea:
World Economic Forum
Scott Santens, 15 January 2017
Consider for a moment that from this day forward, on the first day of every month, around $1,000 is deposited into your bank account – because you are a citizen. This income is independent of every other source of income and guarantees you a monthly starting salary above the poverty line for the rest of your life.
The idea of providing citizens with a livable, basic income certainly has its attractions and might render welfare benefits obsolete if implemented as a simple addition to any actual earnings.
That said, the bulk of the UK’s welfare regime is strictly means-tested, according to individual need and household circumstances, whilst a UBI would merely require citizenship (though some in the US might possibly argue that illegal immigrants should be entitled too). But it’s probably also true that administering UBI would be cheaper and less complicated than running numerous departments of government needed to oversee means-testing.
What is perhaps telling though is that, according to the WEF article, “The true net cost of UBI in the US is […] closer to an additional tax revenue requirement of a few hundred billion dollars”. This implies that UBI requires a Keynesian model of economics – one that features borrowing or printing money in order to fund it. After the crash of ’08 and subsequent bank bailouts, do we really want more reasons to go down that worn-out path?
One model worthy of consideration is Alaska, which has paid UBI since 1982. The government there uses a model that pegs payout levels to national dividends from exploitation of natural resources – thereby getting round the need to borrow or print money. This sounds ideal until one hears that Alaska’s UBI has been too low to cover living expenses for many years; instead merely providing an annual top-up in the region of hundreds of dollars annually for recipients.